In this marketplace, advisers might not be aware of the short-term finance options for clients until they are presented with a personal case study that brings home what can be achieved.
Take for instance, one of our employees here who lives locally and is currently having a double-storey rear extension on her home. It’s being built by a family friend, Martin, who has been working simultaneously on both her house and another large extension in Berkshire.
Martin recently started to turn up more regularly and not wishing to look a gift horse in the mouth our employee asked him why he was suddenly at her house every day as opposed to intermittently. She was told that the owner of the big building job in Middlesex had run out of money and Martin was delaying working there until the finances improve. It turns out that the Middlesex property owner is a regular client of Martin’s and running out of funds is also a regular occurrence.
Now, not only does this situation look unsightly but there are a number of general issues raised by such a situation. For a start, having a part-finished building project left open to the elements for an extended period is never beneficial, particularly with the changeable weather we have been having lately. In addition the materials required to finish the job are going up in price all the time.
On top of this having building work on a property generally results in the home insurance being invalid when, as a homeowner, they are most vulnerable to theft and vandals. When the owner has finally sourced the money to begin the work again, builders will also need to be rebooked and most worth their salt are busy several months in advance.
So, what are the options for our Middlesex property owner, or indeed any homeowner client you might have who find themselves in such a predicament? Well, they can of course go back to their existing lender for the funds; but, apart from the obvious timescale issues, the lenders’ surveyor can inhibit proceedings with a retention of anything up to 100% of the property value depending on the volume of works still required to be done.
Bridging finance on the other hand can provide a short-term cash injection to finish a project but they might also want to think about development finance with stage payments in order to allow work to continue in a structured manner.
We all know, that time can be of the essence when it comes to certain clients – some of the most lucrative property deals are the most time sensitive. Serial property developers, for instance, could miss out on further purchases that are required to complete on a short timescale by inhibiting the ‘mortgage-ability’ of property in their current portfolio by keeping it in an unfinished state. It’s important that advisers keep this in mind with this type of client, and that if they’re unable to advise and source on this themselves, then they use a master broker and packager like ourselves.
Also, advisers should not forget their introducer relationships when it comes to such finance needs. Estate agents working in sales and lettings, and solicitors dealing with conveyancing, will also come across clients in need of short-term funding. So when talking with contacts advisers mustn’t forget to mention the benefits of bridging or development finance.
And what about Martin? Well, as you might expect, our employee has filled him in on all the benefits of using bridging finance, and his Middlesex client is talking to his own financial adviser, and us, with a view to arranging the necessary bridging finance. There are always opportunities out there and the important point is to remember to spread the message about these solutions as wide as possible.
First 4 Bridging